More than half think it’s a good time to invest
and feel better financially
After two consecutive quarters of recession anticipation, trader
expectations are shifting to a more optimistic sentiment overall
about the market environment. The latest Charles Schwab Trader
Sentiment Survey reveals that traders are more bullish on the U.S.
stock market than they were in the second quarter; for the next
three months, 44% are bullish and 35% are bearish, compared to 32%
bullish and 52% bearish in Q2.
While most (69%) of Schwab’s trader clients still think it’s
likely that the U.S. economy will officially enter a recession,
that figure is down significantly from 86% in Q2 and 87% in Q1.
Those who think a recession is likely are also pushing back their
expectations for when it will begin and continue to believe it will
last less than one year. Among traders expecting a recession, 64%
now predict it will start in Q4 2023 (26%) or later (38%) compared
to just 19% who predicted a recession would begin in that timeframe
last quarter.
The Charles Schwab Trader Sentiment Survey is a quarterly survey
that explores the outlooks, expectations, and perspectives of
traders at Charles Schwab and TD Ameritrade. It found:
Primary concerns around
investing
Likelihood of a recession
Expected length of a recession
Economic data influencing
outlook
Potential of a recession
14%
Certain
10%
6 months or less
22%
Inflation
77%
Fed raising interest rates
14%
Highly likely
22%
6 – 12 months
42%
Consumer spending
63%
Political landscape in D.C.
13%
Somewhat likely
37%
1 – 2 years
29%
Labor market
55%
Inflation
10%
Somewhat unlikely
18%
More than 2 years
9%
Consumer debt
43%
Market correction
10%
Highly unlikely
4%
Housing market
38%
“While traders certainly don’t feel we’re entirely out of the
woods yet when it comes to an economic downturn, we’re seeing an
influx of cautious optimism,” said James Kostulias, head of Trading
Services at Charles Schwab. “This is no doubt thanks to a sunnier
economic picture overall this quarter. The jobs market may be
cooling somewhat, but it continues to be strong, and unemployment
remains remarkably low, especially compared to pandemic-era highs.
Even the most recent inflation numbers, while they do indicate a
modest rise, are a far cry from the highs we saw in 2022. Concerns
may remain, but bullishness is on an upswing.”
Signs of Optimism
Mid-life and older traders are the most bullish (49%) while that
number drops to 41% for younger traders and 38% for retirees. While
bearishness is on the decline, one in five traders express
uncertainty about their market outlook. That lack of clarity is
even higher (one in four) among retirees.
Overall, 51% of traders think it’s a good time to invest in
stocks, mutual funds and other equity-based investments, up from
41% in Q2. Additionally, 53% feel they are better off financially
than they were a year ago compared to only 36% in the previous
quarter. Traders largely continue to feel confident in making
investment decisions (63%), a number that remains virtually
unchanged quarter-over-quarter.
“Retired and younger investors can be particularly sensitive to
market swings, so it makes sense that they might feel a little less
bullish compared to mid-life and mature investors who have
experienced many market cycles over their lifetimes,” said
Kostulias. “This experience could lead mid-life and mature traders
to feel more comfortable taking calculated risks. This is just one
area where the many educational resources and trading tools
available at Schwab can make a big difference, and traders are
taking advantage of these. Traders say they are now spending more
time researching their trades before executing, and our tools can
help them to ideate, create, execute, and monitor their trades
under multiple conditions and scenarios.”
Sector and asset class outlook
At a sector level, traders are the most bullish on energy (51%),
information technology (51%, a significant bump from 38% in Q2) and
health care (47%). Real estate is the only sector that the majority
of traders are bearish on (54%).
At the asset class level, many traders are bullish on value
stocks (46%), domestic stocks (44%), growth stocks (42%) and
equities in general (40%). Traders are slightly less bullish on
fixed income than the previous quarter, as sentiment ticked down
from 42% to 35%.
AI’s impact
Artificial intelligence (AI) is emerging as an important factor
in traders’ decision-making, in terms of both the companies they
invest in and how they feel the technology will influence the
market. Two-thirds of traders (66%) see AI as potentially having a
massive or significant impact on the market and 35% are already
factoring company use of AI into their stock analysis. Just over
half of traders (51%) are bullish on AI stocks for the next three
months.
Factoring company use of AI into stock
analysis
Massive or significant impact of
technologies over next 1 – 3 years
Yes
35%
Artificial intelligence
66%
No
45%
Quantum computing
41%
Not sure/don’t know
20%
Blockchain
21%
Virtual/augmented reality
19%
The Metaverse
13%
About the Charles Schwab Trader Sentiment Survey
The Charles Schwab Trader Sentiment Survey is a quarterly study
exploring the outlooks, expectations, trading patterns and points
of view of active traders at Charles Schwab and TD Ameritrade –
defined as those making more than 80 equity trades, more than 12
options trades, or those who make futures or forex trades over the
course of the year. The study included 768 Active Trader clients at
Charles Schwab and TD Ameritrade between the ages of 18-75 and was
fielded from July 6 – August 3, 2023.
About Charles Schwab
At Charles Schwab, we believe in the power of investing to help
individuals create a better tomorrow. We have a history of
challenging the status quo in our industry, innovating in ways that
benefit investors and the advisors and employers who serve them,
and championing our clients’ goals with passion and integrity.
More information is available at aboutschwab.com. Follow us on
Twitter, Facebook, YouTube, and LinkedIn.
Disclosures Investing involves risk including loss of
principal.
(0823-3PTD)
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version on businesswire.com: https://www.businesswire.com/news/home/20230823544589/en/
Margaret Farrell Charles Schwab (203) 434-2240
Margaret.farrell@schwab.com
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